Making a case for more candor at startups

— Connie Loizos is a contributor for PE Hub, a Thomson Reuters publication. This article originally appeared here. —

In an age where seemingly everyone in the startup community now blogs, tweets and leaks his or her news, stretching the truth has become de rigueur. But I’d argue that it’s creating distrust; it’s also distorting the way that founders, the real engine of Silicon Valley, see the world.

What can be done about it, if anything? Recently, I asked neuroscientist and best-selling author Sam Harris, whose new Kindle essay, “Lying,” explores our fundamental inclination to lie and self-promote. Our conversation has been edited for length.

Q: In your essay, you say your interest in lying was piqued as a Stanford freshman in a popular ethics course. What was so life-changing about it?

A: The course is surprisingly simple in its format and content. Basically, 10 people sit around giving (professor) Ron Howard — a pioneer in management science — examples of lies they think worth telling, and he just shoots them down. You learn the really poisonous role that lying plays, and that the lies you think people are justified in telling have hidden costs that most people find quite unacceptable at the end of the day. He teaches the course every year and I know many Stanford graduates in tech have been influenced by it.

Q: That’s interesting to hear, given that so many startups continue to operate in shrouded secrecy, or else they exaggerate some aspect of their business.

A: Well, secrecy on its own is a phenomenon that can be maintained without deception. You can ask, ‘How much money do you have in your bank account?’ And I can truthfully tell you that I don’t want to say. What’s deceptive is when a company pretends not to have secrets, or it withholds important information. That’s a problem.

Q: Do you think businesses need to abide by the same ethical codes as people?

A: Many people think it’s ethically justified to have two, distinct ethical codes: one for the way they treat their friends and family and another that applies to business relationships and customers. It’s a problematic practice, and it becomes this engine of embarrassment and misbehavior.

Think of going into a store, where the salesperson tries to sell you something. But the moment they learn that you’re friends with their cousin, they tell you not to buy the thing they’ve just recommended to you. Subtly, or even grossly, their behavior changes, but there’s something really unseemly about that. It punctures your trust in the person.

Q: In Silicon Valley, many companies depend on spin to get from one financing round to the next, or one customer win to another. Is that so terrible?

A: There are so many costs to a culture of spin. It’s kind of a situation of mutually assured destruction, where you have this arms race of good news, and the price you pay for being candid about your missteps or problems on the horizon is that everyone will turn to your competitor — who will be busy lying about what’s happening on their side.

So the price is high. Yet the fact that we know everyone is spinning builds cynicism to the point where people are pricing in the possibility of people’s deception.

Q: What’s the case for people to change their behavior?

A: There’s a real power to simply being honest in a context where many people are so often dancing around the truth. There’s an integrity that comes with that, even if the reward for having integrity isn’t always immediate.

Steve Jobs came out and told people how sick he was (and Apple shares never nosedived). Meanwhile, people can lose a tremendous amount of money when CEOs are deceptive where they can be.

Another aspect to spin to keep in mind: When people don’t have good information about reality, they think their difficulties are theirs alone. Take the culture of spin around parenthood and motherhood. We had our first child 2.5 years ago, and while obviously, people complain about being parents, most people tend to conceal a lot of the details about just how hard the experience is, beginning with the delivery. So you can think: Why is this happening to me? You’re isolated in your stress when people aren’t giving you good information.

Q: OK, a random example: What do you say to the startup that has five employees but a couple of major customers that have been led to believe it’s far larger?

A: That’s a high-wire act that’s likely to end in a great fall, because if you’re pretending one thing about your business, and the truth can be found out one way or the other, the disparity will make you look bad. Besides, if you’re providing value, it’s easy to make the truth look good because the truth is good. If you have five employees and you have something good to offer your clients, you probably have five incredibly productive people working for you, or else you’ve automated a particular practice. Either way, five employees who seem like they’re doing the work of a hundred should be a selling point.

Q: What’s a classic thought experiment that you like to use?

A: You go to a garage sale and you see someone selling something for a dollar — say a book — that you know to be worth $10,000. Do you buy it for a dollar, then turn around and sell it and feel good about yourself? From a business point of view the answer is probably yes. But if you knew the person was a friend of a friend, you might feel like that relationship precluded you from profiting off his or her ignorance.

Most people, when they think about it, conclude that the truly ethical solution is to say, ‘This is truly valuable and you shouldn’t be selling it for a dollar.’ And the truly ethical thing for the other person to say is, ‘I had no idea, but now I’m going to sell it for what it’s worth, and I’m going to cut you in for half.’ Everyone walks away happy there; that’s a real business. But the zero sum alternatives are the state of nature.

Q: Which is the inescapable problem, isn’t it — that we’re just sort of wired to lie in certain situations, even if they’re lies of omission?

A: We’ve developed a strong ability to deceive others and a poor ability to detect deception in others, and the cost of both is huge. Meanwhile, the commitment to telling the truth is purifying in many ways. You’re often humbled to discover what the truth is, and that you can be a better person.

Q: How do you do it, practically speaking? And — tell the truth — does anyone dare ask you what you think anymore?

A: You can train people to know who you are. And yes, if people don’t want [unvarnished] information from me, presumably they don’t ask.

It’s not that I haven’t told a lie in 25 years; I have. But for the most part, they’ve been lies that you stumble into. You didn’t intend to lie but you realize mid-sentence that perhaps you’ve mixed two anecdotes and you have to decide if it’s too trivial or pedantic (to interrupt yourself and start over).

You can find yourself occasionally just talking and noticing that that’s not quite true what I just said. Everyone falls into that, and it’s not an accident that many of those errors are in the direction of making yourself look good and not bad. Everyone has this self-serving bias in how they present reality. It’s good to dampen it as you can.

If PE hub is going to feature luminaries like Prof. Sam Harris giving business insights then it would be much more interesting to ask him about which business practices and ideas he thinks leave no alternatives but killing the executives.